"Breaking The Net" Of Shanghai Electric And The Mystery Of Its Subsidiary Companies To Be Solved

A case investigation report from the China Securities Regulatory Commission has once again plunged Shanghai Electric, an old state-owned enterprise, into a whirlpool of public opinion.

On the evening of July 5, Shanghai Electric announced that it had received the "Notice of investigation" issued by China Securities Regulatory Commission to the company. Because the company was suspected of illegal information disclosure, it decided to file a case for investigation in accordance with the relevant provisions of the securities law of the people's Republic of China.

For a while, the major investment interactive platforms "exploded", and many investors were filled with doubts and worries. Why was Shanghai Electric put on file for investigation? Is there any possibility of "ST" after filing an investigation? Can investors file claims?

On July 6, in view of Shanghai Electric's case filing and investigation, a reporter from the 21st century economic report called the Secretary of the board of directors of the company but was not answered.

A securities rights lawyer told the 21st century economic report that Shanghai Electric's case filing investigation may be related to the major risk tips previously announced, "it was found that the accounts receivable of the subsidiary company were generally overdue at the end of April, and it was not disclosed until the end of May. This is no longer in line with the basic principles of timely and fair information disclosure in the" Stock Listing Rules "issued by the Shanghai Stock Exchange

On May 30, this year, Shanghai Electric issued a major risk warning announcement. Its holding subsidiary, Shanghai Electric Communication Technology Co., Ltd. (hereinafter referred to as the communication company, with 40% of Shanghai Electric holding shares), generally overdue accounts receivable, and there is a risk that large accounts receivable cannot be recovered. In extreme cases, the communication company may cause a loss of 8.3 billion yuan to Shanghai Electric.

As soon as the risk was publicized, Shanghai Electric's share price immediately fell to the limit the next day. As of July 6, the lowest intraday share price of the company hit 3.91 yuan per share, a new low in nearly seven years.

The "net breaking" of stocks is not a "golden pit"

In the memory of the older generation of Shanghainese, located in Minhang District in the southwest of Shanghai, there is a saying of "four King Kong" - Shanghai Electric Machinery Factory, Shanghai steam turbine plant, Shanghai Boiler Factory and Shanghai Heavy Machinery Factory, which witness the historical growth of Shanghai manufacturing industry. In the wave of state-owned enterprise reform in the 1980s, the "four King Kong" became an important asset part of Shanghai Electric, and also established the latter's pivotal position in the whole domestic manufacturing industry.

Shanghai Electric is a large-scale comprehensive high-end equipment manufacturing enterprise. Its leading industries focus on energy equipment, industrial equipment and integrated services. Its products include thermal power generating units (coal power, gas power), nuclear power generating units, wind power generation equipment, power transmission and distribution equipment, environmental protection equipment, automation equipment, elevator, rail transit and industrial Internet. As of the first quarter of 2021, the total assets of Shanghai Electric are 312.9 billion yuan, and the shareholders' equity of the parent company is about 69.9 billion yuan.

Under the huge asset scale, Shanghai Electric has invested hundreds of subsidiaries. According to the information provided by qixinbao, the company has 124 foreign investment enterprises. By the end of 2020, the book value of Shanghai Electric's long-term equity investment in its subsidiaries was 48.894 billion yuan at the end of 2020.

As a giant enterprise of domestic equipment manufacturing, in recent years, Shanghai Electric has entered a period of transformation. Huang ou, President of Shanghai Electric, said in an interview with the media that the transformation of the company can be summarized as "three acceleration": accelerating the transformation and upgrading from traditional energy equipment to clean energy equipment; Accelerate the transformation and upgrading from traditional manufacturing to intelligent manufacturing; Speed up the transformation and upgrading from single manufacturing to manufacturing + service mode.

The effect of transformation is also reflected in the performance level. In 2018, the revenue of Shanghai Electric will reach 100 billion yuan. In 2020, the company's operating revenue is about 137.285 billion yuan, with a year-on-year growth of 7.67%; The net profit attributable to shareholders of listed companies was 3.758 billion yuan, up 7.34% year on year.

However, Shanghai Electric, which has the halo of "100 billion revenue" and "100 billion net assets", has fallen into valuation dilemma in recent years.

On July 6, the stock price of Shanghai Electric fell 4.8% due to the bad news of filing a case, and hit a new low in recent years. The company's share price has broken through the net, that is, the current share price has been lower than its net assets per share. By the end of the first quarter of this year, Shanghai Electric's net assets per share were about 4.45 yuan. The latest closing price of the company is 3.97 yuan / share, which means the latest price to book ratio is 0.89.

But in the view of some investors, breaking the net does not mean that Shanghai Electric's share price has been "golden pit". The biggest uncertainty is how much negative impact the communication company will eventually bring to Shanghai Electric?

According to the previous announcement of Shanghai Electric, it is assumed that major losses such as uncollectible accounts receivable and unable to realize inventory of communication companies will directly affect their investment rights and interests. As of December 31, 2020, the book value of shareholders' equity of Shanghai Electric to communication company is 526 million yuan, that is, the net profit affecting equivalent value.

What worries investors is another big risk that communication companies may pose. Shanghai Electric said that the total amount of shareholder loans it provided to communication companies was 7.766 billion yuan, all of which had significant risk of loss. The superposition of the two major risk losses leads to the statement that "under extreme circumstances, the net profit attributable to the parent company may eventually result in a loss of 8.3 billion yuan".

The net profit loss risk of 8.3 billion yuan means that it will take at least two years for Shanghai Electric to fill the "hole" once the possibility arises.

Under pessimism, Shanghai Electric's share price is under pressure. This also affects the financing of the company to a certain extent.

In March this year, Shanghai Electric issued the 2021 non-public issuance plan of A-shares. It plans to issue 1.57 billion shares and raise no more than 5 billion yuan for zero carbon energy power technology research and development project, key platform and system development project of smart city, and upgrading and innovative application project of Xingyun Zhihui industrial Internet platform.

However, due to "there may be the situation that the issue price is lower than the company's net assets per share", Shanghai Electric announced in May that "in order to safeguard the rights and interests of state-owned assets and avoid excessive dilution of shareholders' rights and interests of the company, after comprehensive analysis and careful consideration, we agree to terminate the company's non-public issuance of a shares."

Support for subsidiaries is beyond common sense

There are many mysteries surrounding the communication company: Why did the company suddenly explode? Why did Shanghai Electric borrow 7.7 billion yuan to this company? What benefits can Shanghai Electric get from communication companies with the support beyond common sense?

In this regard, the 21st century economic report reporter's call to the communication company registered in the national enterprise credit information publicity system was also not answered.

Information shows that the communication company was established in March 2015 with a registered capital of 300 million yuan. The company has 6 shareholders, including Shanghai Electric, Shanghai Xingditong communication, Anshan Shenghua technology, Beijing Fuxin Fengyuan trade, Shanghai Dongjun investment and Shanghai Naipan enterprise management. Among them, Shanghai Electric holds 40% of the shares and is the controlling shareholder.

It is worth noting that after the equity penetration, except for Shanghai Electric, the shareholders behind the remaining five shareholders cross to varying degrees. Take Shanghai Xingditong communication as an example, the company is held by Sui Tianli and Zou Xunyi, with the shareholding ratio of 90% and 10% respectively. The name of Sui Tianli appeared in the list of shareholders of Shanghai Naipan enterprise management. Together with the names of the shareholders, Wang Jicai (the shareholder of Anshan Shenghua Technology), Liangshan (the single shareholder of Shanghai Dongjun investment), Wu Baosen (the shareholder of Beijing Fuxin Fengyuan trade) and Shen Xin (the general manager and legal representative of the communication company).

According to public information, Sui Tianli is the person in charge of the China Electronics Industry Science and technology exchange center, with 30 years of working experience in the field of information and communication applications. He has participated in the expert group work of the "new generation broadband communication project" (special project III) of the "12th Five Year Plan" national major project, and has won the second prize of military science and technology.

The 21st century economic report reporter inquired and found that the names of "suitianli" and "Shanghai Xingditong communication" entered the capital market twice in 2018: on the one hand, the largest shareholder of haigao communications, a new third board company planned to acquire at a high premium of 1.8 billion yuan, was Shanghai Xingditong communications controlled by Sui Tianli; On the other hand, when the rumors of liquidity crisis came out of Kaile technology, another listed company, Shanghai Star earth communication was one of the largest upstream suppliers of the company.

In addition, Shen Xin, the general manager and legal representative of the communication company, also serves as the general manager and legal representative of Shanghai Electric Communication Technology Co., Ltd. (hereinafter referred to as the communication company). From registered capital to shareholder structure, communication companies and communication companies are like twins.

According to the information provided by qixinbao, the communication company was established on December 21, 2020 with a registered capital of 300 million yuan. Shanghai Electric holds 51% of the shares and is the largest shareholder. Another shareholder is Shanghai Xingditong communications, which holds 49% of the shares.

In fact, in addition to the doubts surrounding the identity of the shareholders of the communication company to be further revealed, investors are concerned about why the explosion of the company is so sudden?

Shanghai Electric said in the previous announcement that communication companies mainly produce and sell private network communication products. The sales mode adopted is that customers pay 10% advance payment in advance, and the rest will be paid in installments according to the agreement after the order is completed and delivered. With the business development of communication company, the company has increased its financial support.

According to the financial data, in 2020, the operating revenue of the communication company is 2.984 billion yuan, and the net profit is 90 million yuan. During the reporting period, the company's total assets were 10.104 billion yuan, but the total accounts receivable amounted to 8.672 billion yuan.

The high proportion of operating accounts receivable indicates that the performance of communication companies is low. What's more surprising is that since the establishment of the company for six years, Shanghai Electric has provided shareholders with loans as high as 7.766 billion yuan. Financial data show that as of the end of the first quarter of this year, Shanghai Electric's monetary capital was 30.623 billion yuan. Meanwhile, the company's interest bearing debt was 48.691 billion yuan. In contrast, for a company with a 40% stake, Shanghai Electric's support is indeed extraordinary.

With more information coming to the surface, after the investigation of the CSRC, some mysteries of communication companies are expected to be solved.

?